Sam’s Club vs Costco

We evaluate costs for membership, savings, and other services. Wholesale retailers Costco and Sam’s Club are renowned for their affordable prices and bulk items, providing an uncomplicated shopping experience.

Both retailers offer a wide range of goods at similar prices. They also have a comparable number of stores spread throughout the United States, along with their respective online eCommerce platforms. Customers are required to pay membership fees to shop on their sites, which helps boost sales, cover costs, and build store loyalty.

This article will examine the similarities and differences between the business models of Costco and Sam’s Club, including pricing, locations, and brand choices.

Key Takeaways

• Costco and Sam’s Club have very similar business models.
• Costco is a publicly traded company, while Sam’s Club is a subsidiary of Walmart.
• Costco’s membership costs are higher than average; however, its prices are lower, partly due to its own brands, including Kirkland.
• Costco is the largest retailer globally; however, Sam’s Club has more stores in the U.S.
• Costco’s stores are nearly nine percent larger than the average, based on square footage.

Costco

Costco is regarded as the first bulk retailer, having opened its first store in San Diego in 1976. Since then, it has been selling bulk goods in a variety of warehouse-style stores and has dominated the market across several states.

Locations

Costco had 815 stores across the globe at the close of FY 2021 (ended on Aug. 29th, 2021), with 564 of them located in the U.S. and Puerto Rico. The company has been rapidly opening new warehouses over time, including the addition of 22 stores during FY 2021.

There are thirteen Costco stores located in California alone. Other heavily represented states include Texas, Washington, and Florida. However, there are four states—Maine, Rhode Island, West Virginia, and Wyoming—that do not have Costco stores.

In addition to the U.S., Costco has stores outside of the country, including in Canada, Mexico, Japan, China, and other countries.

Fast Fact: At the end of their respective fiscal years, Costco had 564 stores across the U.S., while Sam’s Club had 599 stores.

The Cost of Membership

Costco provides two membership categories: Gold Star and Gold Star Executive. The Gold Star membership costs $60 per year and grants access to all Costco stores, along with two membership cards. On the other hand, the Gold Star Executive membership costs $120 per year and offers additional benefits, such as a 2.2% Cash-back bonus (up to $1,000) on every Costco and Costco Travel purchase, discounts on various Costco services, and at-home delivery of Costco Connection Magazine.

It is worth noting that Costco also offers a membership for businesses, which includes two tiers: Business and Executive. The Business level is priced at $60 per year and provides the same benefits as regular members, along with the option for resale purchases. The Business Executive level, priced at $120, offers a few additional features, including a two percent cash-back incentive (up to $1,000) for purchases, along with similar benefits to those of the Gold Star Executive package.

Benefits and Rewards

Costco membership grants access to a wide range of products and services, including pharmacy, gas, car rentals, and optical centers. These are often offered at lower prices compared to other retailers. For commercial customers, Costco also provides additional third-party services such as payment processing, medical insurance, and bottled water delivery.

Furthermore, Costco offers a co-branded credit card in partnership with Citi, available to its members. The card provides a 4% cash-back on the first $7,000 spent on fuel each year (1% thereafter), 3% cash-back on dining out and travel, and a percentage on the rest of Costco purchases, as well as a percentage on all other purchases. These co-branded cards can be used wherever credit cards are accepted.

It is worth noting that Costco sells a higher number of private brand items compared to Sam’s Club. While Sam’s Club may have a larger selection of brand-name products, Costco offers its popular private label, Kirkland, which is typically less expensive. Kirkland products are manufactured by top-rated companies such as Starbucks, Duracell, and Kimberly-Clark. Additionally, a majority of Costco stores also carry a wider range of organic food items compared to Sam’s Club.

Financials

Costco is a publicly traded company listed under the ticker COST, with an estimated market value of $223 billion as of November 11, 2021. It operates several smaller subsidiary companies, including Costco Travel and Kirkland brand products. The company primarily focuses on both brick-and-mortar and online retail.

In FY 2021, Costco’s net sales, excluding membership fees, reached $192 billion, which is an increase from the previous fiscal year’s $163 billion. The net profit also saw a 25% growth, reaching just under $5 billion. From a financial perspective, Costco is well positioned with a strong balance sheet that allows it to weather economic downturns and continue investing in its operations as deemed necessary.

Sam’s Club

Walmart’s Sam’s Club is nearly as old as Costco, having opened its first retail store in 1983 in Midwest City, Okla. Both companies offer bulk goods to customers who pay a membership fee, but there are several aspects that differentiate them. These include the number and types of stores they have, the brands they carry, and the costs and benefits associated with their membership fees.

Locations

Sam’s Club operates 599 stores throughout the U.S. and Puerto Rico. Unlike Costco, it has not experienced rapid expansion, resulting in a relatively stable number of stores in recent years.

The largest concentration of Sam’s Club stores is in Texas, where there are 82 locations. Florida follows with 46 stores, and California has 29. However, Sam’s Club is not present in every state. There are no Sam’s Club stores in Alaska, Massachusetts, Oregon, Rhode Island, Vermont, and Washington.

Fees for Membership

Similar to Costco, Sam’s Club offers two membership levels. The first is the Club membership, priced at $45 per year, which grants access to all warehouse clubs and allows for the purchase of additional cards. There is also the more expensive Plus membership, priced at $100 per year, which includes all the benefits of the Club membership and additional perks such as 2 percent cash back on select purchases (up to $500 per year), free shipping, early access to stores, and access to pharmacies and optical services. Overall, both membership levels at Sam’s Club are more affordable compared to Costco’s.

Benefits

At a minimal cost, Sam’s Club members gain access to competitively priced stores that offer a wide range of products. Higher-tiered members can also enjoy discounts on specific products and services, such as eyeglasses, travel accessories, fuel, and brand-name medications.

Sam’s Club also provides a credit card option. The Mastercard, issued by Synchrony Bank, can be used wherever credit cards are accepted. The associated benefits of the Mastercard include 5% cash back on the first $6,000 of fuel purchases annually, followed by 1% thereafter. Additionally, the card offers 3% cash back on dining out and takeout, and 1% cash back on all other purchases.

Financials

Sam’s Club generated $64 billion in net sales in its FY 2021 which is one-third of the amount Costco has recorded. However, the owner, Walmart, has a $414 billion market value at the time of November 11 2021. That’s more than double Costco’s total dollar worth.

In the fiscal year 2021, that ended on January 31st, 2021 Sam’s Club posted an 8.7 percentage increase in net sales, and an 16.1 percent increase in operating profits. In the previous fiscal year when the COVID-19 epidemic was ravaging the country the same numbers were increasing by 1.6 percentage and 8.0 percent and 8.0%, respectively.

The Key Differences between Costco and Sam’s Club

Both Costco and Sam’s Club operate very similar companies, but there are a few distinct differences that create a unique brand for each. Firstly, Costco is a publicly traded company with the ticker symbol COST on Nasdaq. In contrast, Sam’s Club is a subsidiary of Walmart and is traded under the ticker symbol WMT on the New York Stock Exchange.

When it comes to membership costs, Costco’s fees are higher than Sam’s Club’s. The basic and top-tier memberships at Costco are $15 and $20 per year more expensive, respectively, while the opposite is true for Sam’s Club. In terms of product offerings, Sam’s Club provides more brand-name options, whereas Costco offers a larger selection of private label and organic items.

In regards to location, Costco has a greater global presence and more locations compared to Sam’s Club, although both have a strong presence in the United States. California boasts the highest number of Costco stores, while Texas has the largest number of Sam’s Club locations. Both retailers have been selective in opening new stores in certain states, with the exception of Rhode Island, which does not have stores from either Costco or Sam’s Club.

It is important to note that Costco has a larger global presence with more stores worldwide and is experiencing rapid growth. Costco generally offers lower prices compared to Sam’s Club, although its membership fees may be slightly higher. Costco also holds a larger market share within the U.S. and carries a wider selection of well-known brand names.

As of now, Costco is comfortably beating Sam’s Club in the sales category, with three times more revenue, though that larger bottom line could be expected considering its higher number of stores across the world. Costco is slightly bigger stores too, having the average size of 14,666 square feet in contrast to Sam’s Club’s typical of 134,000 square feet.

A clear sign is that Costco seems to be expanding faster, both from the perspective of revenue and store count viewpoints. Sam’s Club has closed several stores in the past few years, accounting for about 10 percent of its total store count in that period. However, Costco has been on an ongoing streak of net store openings.

Which is Better, Costco or Sam’s Club?

This is based on personal preference, such as the kinds of products you buy and which of these two stores is within driving distance from your residence.

Both businesses share similar business models that sell similar goods as well as services and allow access to paying members. What they differ on, apart from location, lies in their brands, the products they sell, their additional perks, and the annual fees for membership. Sam’s Club is slightly more expensive. It’s up to the individual customer to choose which one they would prefer.

Is it true that Costco and Sam’s Club Have Better Prices?

Overall, costs at Costco tend to be lower. However, Sam’s Club offers more brand name items and has a lower membership cost.

Can I use my Costco Membership to Join Sam’s Club?

It’s not true that Costco memberships can be used in places other than Costco stores and on Costco.com. The same goes for Sam’s Club, where membership is restricted to Sam’s Club stores and its e-commerce platform.

Are Sam’s Club Cheaper Than Walmart?

In general, Sam’s Club offers a lower price per unit of product. However, the difference lies in the fact that when you shop at Sam’s Club, you tend to spend more overall because you’re purchasing larger quantities of the product. For instance, at Sam’s Club, you might pay 45 cents for a roll of toilet paper, but you’re purchasing 45 rolls, resulting in a total cost of $20.25. On the other hand, if you shop at Walmart, you’ll pay $8.57 for the same amount of toilet paper, but you’re buying 12 rolls, which comes out to approximately 71 cents per roll.

The Bottom Line

The majority of customers for warehouse retailers such as Costco, as well as Sam’s Club, are those who want to save money by buying in bulk. However, the way they shop doesn’t always translate to online shopping, as the delivery of bulk goods can be a hassle.

The cost of shopping at warehouse stores isn’t always affordable for those who don’t have enough capacity to store their items (e.g., the size of a freezer to allow buying in bulk) or have the cash to cover what can be a costly shopping excursion, compared to Walmart, for instance. The average total transaction is higher for bulk warehouse retailers when compared to discount retailers since – even though you’re paying less per unit cost – you’re spending more overall.

For a lot of shoppers, it’ll be based on which one is the closest to their residence. In other words, the two stores aren’t much different regarding membership fees or the prices of products. The decision between the two will boil down directly to the shopping experience (e.g., for example, if you’re a Costco customer, you can buy a $1.50 hot dog combination).

Of course, not all people are familiar with these stores, and they may want to experience them before deciding on a purchase and committing to a membership. For Sam’s Club, this can be accomplished by signing up for a free 90-day trial membership. However, Costco doesn’t provide such an alternative. If you’d like to explore any of its stores, you’ll need to travel with a Costco member or make sure that no one asks for a credit card on the day you arrive.